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TMI Blog2022 (8) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... all other consequent proceedings would become redundant. A bare perusal of the annexure to the Notice u/s 142(1) dated 10/10/2007 and 15/11/2007 which was issued in the original assessment proceedings u/s 143 makes it clear that the point on which re-assessment proceedings were initiated, was well considered in the original proceedings. We are of the considered view that the Ld. AO has erred in reopening the assessment u/s. 147 of the Act merely by changing his opinion which is unsustainable in law and therefore deserves to be quashed. Therefore, the grounds raised by the Revenue against the order passed U/s. 143(3) r.w.s 147 do not have any legs to stand and hereby dismissed. Disallowance of depreciation on the Project Berth - AR argued that as per the License Agreement entered into with Visakhapatnam Port Trust (VPT) by the assessee, the assessee is owner of the asset for a period of 30 years - HELD THAT:- As per the License agreement the assessee is entitled for the Terminal Value at the end of the License period, at the time of transfer to the Licensor. Therefore the assessee needs to recover the cost incurred in the construction of the Berths, which is out of the fees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision for doubtful debts - HELD THAT:- We find that the provision for doubtful debts is not a bad debt and which needs allowance under the Act. Section 36(1)(vii) of the Act which clearly states that the amount of any bad debts or part thereof which is written off as irrecoverable in the accounts for the previous year shall be allowed as a deduction. In the instant case, the assessee has merely made a provision for doubtful debts and has not written off as bad debts in the books of account. The Vijaya Bank [ 2010 (4) TMI 46 - SUPREME COURT] case relied on by the Ld.AR cannot be applied in the instant case as it relates to provisions made by Banks. Therefore, we are of the view that a provision being contingent in nature shall not be an allowable deduction u/s 36(1) of the Act. Therefore, this ground raised by the assessee is dismissed. - I.T.A. No.2400 to 2402/Mum/2014 And I.T.A. No.2478/Mum/2015 And I.T.A. No.2479/Mum/2015 - - - Dated:- 23-8-2022 - Shri Duvvuru Rl Reddy, Hon ble Judicial Member And Shri S Balakrishnan, Hon ble Accountant Member For the Appellant : Sri PJ Pardiwalla, CA For the Respondent : Sri MN Murthy Naik, CIT-DR ORDER PER S. BAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AO, the assessee filed an appeal before the Ld. CIT(A)-13, Mumbai. The assessee before the Ld. CIT(A) agitated against the assessment order passed U/s. 143(3) r.w.s 147 of the Act based on the fact that notice issued U/s. 148 is misconceived and bad in law. The assessee s representative also made submissions before the Ld. CIT(A) regarding the claiming of depreciation of Rs.8,17,73,779/-. The Ld. CIT(A) partly allowed the appeal, by allowing the depreciation of Rs. 8,17,73,739/- while rejecting the plea with respect to reopening of the case U/s. 147 of the Act. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 4. The Revenue has raised the following grounds of appeal: 1 (i) The Ld. CIT(A) has erred on facts and in law in directing the Assessing Officer to allow depreciation of Rs. 8,17,73,779/- U/s. 32 of the Act without properly appreciating the factual and legal matrix of the case as clearly brought out by the Assessing Officer. (ii) The Ld. CIT(A) has erred on facts and in law in directing the Assessing Officer to allow depreciation of Rs. 8,17,73,779/- U/s. 32 of the Act without properly appreciating the fact that the assessee was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and perused the materials available on record and the orders of the Authorities below. The assessee has challenged the reopening of the assessment before the Ld. CIT(A). The Ld. CIT(A) rejected this ground of appeal and hence the assessee has moved an application under Rule 27 of the ITAT Rules, 1963. Rule 27 of the ITAT Rules, 1963 reads as under: The respondent though he may not have appealed, may support the order appealed against on any of the ground decided against him. Since the AR raised the issue of invoking the provisions of Rule 27 of the ITAT Rules, 1963 supporting the order of the Ld. CIT(A) it deserves consideration. It is seen from the submissions made by the Ld. AR even though the assessee has not agitated the reopening while responding to the notice U/s. 148, has strongly agitated before the Ld. CIT(A) that the reopening is misconceived, bad in law, invalid and hence unsustainable in law. It is also seen from the submissions of the Ld. AR that the assessee has submitted various bills with regard to addition to fixed assets to the tune of Rs. 81.91 Crores before the Ld. AO. However, it is noticed from the order of the Ld. AO that there is no discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Commissioner Of Income Tax, Delhi v. Kelvinator Of India Limited reported in (2010) 320 ITR 561 (SC) held as follows: where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post 1-4-1989 , power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989 , Assessing Officer has power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot directing the AO to allow amortization of the expenditure incurred on development of the Project Berth. 5. The appellant craves leave to add, alter, modify or vary one or more grounds. 13. Ground No.1 pertains to reopening of assessment u/s. 147 of the Act. 14. The Ld. AR argued that the reopening of assessment by the Ld. AO is misconceived and bad in law. Per contra, the Ld. DR relied on the order of the Ld. Revenue Authorities. 15. We have considered the rival submissions, material available on record and gone through the orders of the Authorities below. We find that the Ld. AO issued notice U/s. 148 of the Act to disallow the depreciation amounting to Rs.17,53,11,007/- stating that the assessee is not the owner of the Berth constructed by it. Since the issue was debatable due to conflicting decisions regarding the allowability of depreciation for the developer of the infrastructure facility it is found that the AO has reopened the case U/s. 147. This reopening by the Ld. AO cannot be said to be a change of opinion but based on the conflicting decisions on the same issue available at that point of time. Therefore we are of the considered view that the reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, equipment and other immovable and movable assets constructed, installed, located, created as provided by the Licensee (the assessee), shall, until transfer to the Licensor namely Visakhaptnam Port Trust will be with the assessee for a period of 30 years. Article 13 of the License Agreement states that, on the expiry of license period that ie., after thirty years, the licensee shall transfer the assets to the licensor. Admittedly there is a transfer at a future date. It is also very clear from the agreement that the assessee is entitled for collecting the fees for the use of the Berths. The assessee can never become a legal owner of the Berth. Even though, the construction was made in leased assets, which are transferable after a certain period, the assessee cannot claim ownership of the same for the purpose of section 32 of the Act. In the instant case, the expenditure incurred by the assessee on BOT project brings some kind of enduring benefit to the assessee. However, the expenditure incurred by the assessee does not bring into existence any capital asset for the assessee. The asset which was created belongs to the Visakhapatnam Port Trust and the assessee derives only an endu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of roads/highways under BOT projects in earlier years, the total deduction so claimed for the Assessment Years prior to the Assessment Year under consideration may be deducted from the initial cost of infrastructure facility of roads/highways and the cost so reduced‟ shall be amortized equally over the remaining period of toll concessionaire agreement. From the plain reading of the above para, we are of the considered view that the Circular can be applied retrospectively in respect of deductions claimed in previous assessment years. We therefore direct the Ld. AO to amortize the cost of buildings, structures, berths, wharves, equipment and other immovable and movable assets constructed, installed, located, created as provided by the Licensee after deducting depreciation claimed by the assessee and allowed by the revenue in earlier years so that the amortization claimed for the year under consideration shall be the difference between the initial cost and the depreciation already claimed by the assessee which needs to be amortized over the remaining license period. It is ordered accordingly. Thus, this ground no.2 raised by the assessee is allowed for statistical purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities. 27. The Ld. AR argued that as per the License Agreement entered into with Visakhapatnam Port Trust by the assessee, the assessee is owner of the asset for a period of 30 years. The Ld AR referred to Article No.6.1(b) of the License Agreement which states as follows: The ownership of all infrastructure assets, buildings, structures, berths, wharves, equipment and other immovable and movable assets constructed, installed, located, created as provided by the Licensee in the Licensor‟s Assets pursuant to this agreement shall, until transfer to the Licensor in accordance with this Agreement, be with the Licensee. 28. The Ld. AR relied on the decision in ACIT vs. Progressive Constructions Ltd reported in [2018] 92 taxmann.com 104 (Hyderabad Trib.) (SB) and pleaded that the asset created by the assessee on BOT shall be treated as intangible asset and accordingly the depreciation shall be allowed. Alternatively the Ld. AR also pleaded that the order of the Ld. CIT(A) be upheld. 29. We have heard the rival contentions and gone through the material available on record and the orders of the Authorities below. A perusal of the License Agreement by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stead of reimbursing the cost of construction to the assessee has granted right/benefit of enduring business revenue to the assessee for a period of 30 years. As per the License agreement the assessee is entitled for the Terminal Value at the end of the License period, at the time of transfer to the Licensor. Therefore the assessee needs to recover the cost incurred in the construction of the Berths, which is out of the fees to be collected from users. The benefit of earning revenue from the berth constructed by the assessee, but not legally owned by the assessee, arises from the license granted by the Licensor (VPT). 31. Considering this peculiar situation to recover the cost of construction, where the assessee could not claim depreciation, CBDT Circular No. 09/2014 has clarified the treatment of such expenditure incurred in BOT agreements. Therefore, in our considered view the assessee is entitled for the amortization of the assets developed under BOT project over the lease period of the asset. The CBDT Circular No. 09/2014 being a clarificatory Circular this can be applied retrospectively for the AY 2008-09 and 2009-10 also. We also refer para 7 of the said Circular which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in North Karnataka Expressway Ltd vs. CIT in the assessment order dated 5th March, 2013 passed U/s. 143(3) of the Act for the AY 2010-11. 2. On the facts and circumstances of the case, the Ld. CIT(A) erred in upholding that the appellant was not the legal owner of the project berth for an indefinite period of time, despite the fact that Article 6(1)(b) contained in the License Agreement dated 28th November, 2001 entered into between the appellant and Visakhapatnam Port Trust clearly, expressly and unambiguously provided that the ownership of the Project Berth shall remain with the appellant during the License period of 30 years. 3. Without prejudice to Ground No.1 to 2 above, on the facts and circumstances of the case, the Ld. CIT(A) erred in not directing the AO to allow amortization of the expenditure incurred on development of project berth. 4. On the facts and circumstances of the case, the Ld. CIT(A) erred in upholding the disallowance of interest expenditure of Rs. 1,91,00,000/- on work-in-progress under section 36(1)(iii) of the Act. 5. On the facts and circumstances of the case, the CIT(A) erred in upholding the disallowance of deduction of provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s dismissed. 42. With respect to Ground no.5 regarding the disallowance of provision for doubtful debts of Rs. 10,54,813/- the Ld. AR submitted that since even though the amount was not written off in the books of accounts, certain provision has been made which was considered doubtful of recovery in the books of accounts. The Ld. AR also pleaded that this provision for doubtful debts has been directly deducted from the receivables from the balance sheet. The Ld.AR relied on the decision of Hon ble Supreme court in the case of Vijaya Bank vs CIT Anr [323 ITR 166(SC)]. Per Contra the Ld. DR relied on the order of the Ld. Revenue Authorities. 43. We have heard the rival contentions and gone through the material available on record and the orders of the Authorities below. We find that the provision for doubtful debts is not a bad debt and which needs allowance under the Act. Section 36(1)(vii) of the Act which clearly states that the amount of any bad debts or part thereof which is written off as irrecoverable in the accounts for the previous year shall be allowed as a deduction. In the instant case, the assessee has merely made a provision for doubtful debts and has not writte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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